little pieces of political economy and others

The Great Enrichment and Social Justice, by Will Wilkinson (May 2016)

The great strange fact of human history is how it came to be that a good chunk of our species, after more than 100,000 years of scraping by, suddenly got rather wildly rich. Deirdre McCloskey, the eminent economic historian and social theorist, calls it the “Great Enrichment.”

The suddenness of the Great Enrichment is nuts. Graphs like this one actually conceal how nuts it is. Imagine a linear horizontal axis that is nothing but a flat line hovering above zero for, like, a mile. And then, about a second ago in geological time, wham! And here you are, probably wearing pants, reading about it on a glowing screen. Nuts is what it is.

Accounting for the Great Enrichment is the deepest puzzle of the social sciences. Some think it was all just a matter of figuring out how to exploit natural resources, or some combination of enslavement, exploitation, and colonial plunder, or maybe it was just geographic and genetic good luck. None of that really explains it.

Joel Mokyr says it was the development of science and technology. Douglass North and his followers, such as Daron Acemoglu and James Robinson, say it was a matter of stumbling into the right political and economic “institutions”—of getting the “rules of the game” right. Acemoglu and Robinson say institutions need to be “inclusive” rather than “extractive.” They become more inclusive when ruling elites take a little pressure off the boot they’ve got on people’s backs (which they do mainly when cornered by effective collective action from below) and allow economic and political rights to expand. Deirdre McCloskey says the Great Enrichment came about from a shift in beliefs and moral norms that finally lent dignity and esteem to the commercial classes, their “bourgeois” virtues, and the tasks of trade and betterment. This revaluation of values was the advent of what has come to be known as “liberalism.”

Each of these views is part of the truth. The debate is mainly a matter of how beliefs and norms, institutions and incentives, scientific knowledge and technical innovation all fit together. Which are the causes and which are the effects? There’s no way to adequately summarize the involuted nuance of the debate. But it’s not wrong to sum it up bluntly like this: humans rather suddenly got immensely better at cooperatingand now a lot of us are really rich.

Before I go on, I hasten to add that not all of us are really rich. Most humans don’t live in the places first touched by the Great Enrichment and aren’t that rich now. Moreover, the path from “extractive” to “inclusive” institutions in the places that did get rich has been bumpy and brutal, and the liberal revaluation of values has always been opportunistically applied and rife with hypocrisy.

Here’s a familiar example. When the American colonial elites, piqued by their lack of power to set local policy, rebelled against their king and seceded from his empire, they drew on compelling new liberal ideas about natural equality and set up a constitution that was, at the time, a huge leap forward toward more “inclusive” institutions. But their rebellion and new liberal legal order locked in place an absolutely monstrous, maximally exclusive, maximally extractive system of human enslavement—which, it so happens, was abolished across the British Empire in 1833, three decades before the Emancipation Proclamation. Suffice it to say, the complaints of George Washington and Thomas Jefferson against King George were completely trivial next to the complaints of the people Jefferson and Washington bought and bred and worked and whipped like so much livestock. The enrichment has been great, but its progress has been greatly uneven and its riches unevenly, unfairly spread. These inequalities shape our world, and our politics, to this day.

Still, a lot of us did get rich, and it happened through grand improvements in the scope and fruitfulness of cooperation. We cooperate because we do better together. When we effectively coordinate our efforts, we produce gains over and above what we could have done acting independently. Those gains are the “surplus” of cooperation. Enrichment—that is to say, economic growth—is about creating ever more and ever larger surpluses from cooperation.

But whenever we produce a surplus there’s always the question of how to divvy it up. If it’s a question about how to divide it fairly—about who ought to get what, rather than about who has the power to snatch the most—then it’s a question of “distributive justice.”

Questions of distributive justice are hard. Who did how much work? How well did they do it? How relatively valuable were the efforts of the various contributors to the common enterprise? Maybe everyone agreed to the division in advance. But was the distribution of bargaining power that led to the agreement itself fair?

Our answers to these questions matter. When the distribution of the burdens and benefits of cooperation aren’t fair, we get fed up. And we want to keep positive-sum games going. We need to keep them going. But if we keep getting less than those doing less, we feel used. So we fight for our share. We develop enforcement mechanism to punish free-riders. We impose sanctions. We negotiate. According to some thinkers, the adaptive function of some of our most basic emotions is to police compliance with cooperative norms and bargain over who does and gets how much of what. An indignant fit of pique, slow-burning resentment, an explosion of petulant anger—all are common “moves” in everyday distributional negotiation. If we can’t negotiate a fairer deal, we’ll withdraw or minimize our efforts, one way or another. The surpluses will get smaller. Positive-sum enrichment might turn into negative-sum conflict. Lacking good exit options, mainly we press on and bargain the best we can with the leverage we’ve got.

Humans may be natural cooperatorswith a built-in instinct for distributive fairness, but we’re also natural opportunists who will negotiate over everything, including the very idea of distributive fairness, to increase or preserve our shares. “That’s not fair!” is always a bargaining move and only sometimes a fact.

Surplus-promoting distributive fairness is so hard to achieve in part because we rarely agree when it is a fact. People with outsized bargaining power have always found a way to convince themselves that they deserve it, and they tend to use that power to crush those clamoring, often righteously, for a bigger cut of the surplus. Indeed, the powerful get nervous when a fairer distribution of burdens and benefits induces greater cooperative effort, spurs creativity, and creates larger surpluses—even if it makes themricher. The trouble is that growth makes others richer, too, decentering power, inviting challenges from rival, new-money elites. So the old guard sooner or later tends to close ranks and reassert rules of exclusion and exploitation and stagnation. Acemogulu and Robinson say something like this happened to the Venetians, to the Romans, probably even happened to the Mayans. We’ve always had the potential for great enrichment in us, but we always managed to crush it with domination, expropriation, and war. Until, miraculously, we didn’t.

When people talk about “social justice,” sometimes they’re really talking about “distributive justice.” The immense influence of socialist ideology in the 20th century encouraged the idea that social and distributive justice pretty much came to the same thing. But 1991 was a long time ago, and these days when people agitate for social justice, or refer derisively to those who do as “social justice warriors,” they’re likely to be talking at least as much about the distribution of rights and dignity as they are to be talking about the distribution of material resources and economic opportunities. That’s a healthy development. Social justice is about a lot more than dividing up the surplus from the totality of society’s manifold, interlocking cooperative schemes. Social justice is also about (but not exhausted by) the way we need to treat people in order to get cooperation off the ground in the first place. How do we bring people to the table? How do we encourage them to bring their best? How do we get them to adhere to and enforce the norms that make cooperation more productive and that keep it from falling apart?

There’s not a single answer to that, but here are some good ones. Treat people as though their lives matter. Treat them as equals. Treat them with respect. Honor their rights.

You know what’s nuts? What’s nuts is that nobody kicks off a discussion of justice, distributive or social, with the fact of the Great Enrichment. Because the upshot of our best accounts of the most important thing that has ever happened to the human race seems to be that equalizing the distribution of rights and liberties, powers and prerogatives, respect and esteem led to an increase in the scope and productivity of cooperation, generating hugely enriching surpluses.

And these gains spurred further demands for and advances in inclusion and dignity—that is to say advances in giving people what they’re morally due, in virtue of being people—which led in turn to broader, more intensive, more creative cooperation, producing yet more enrichment, and so on. There appears to be a very happy relationship of mutual reinforcement between what is very naturally called “social justice” and the sort of enrichment that is known to produce longer, healthier, happier, human lives.

This seems incredibly important, but we haven’t heard that much about it. Why not?

Here’s my best guess: an unintentional 20th century left-right conspiracy made it all-but-impossible for anyone to take seriously the idea that gains in social justice launched and sustained the era of modern growth, and that enrichment in turn reinforced and promoted further gains in justice, and still does.

The 20th century socialist-leaning left misdiagnosed the sources of the economic growth. The Great Enrichment was rooted in the exploitation of labor and the depredations of colonialism, while ongoing post-capitalist production was largely a matter of technology and rational state management. Poverty is toxic and the effects of widespread wealth are beneficial. But wealth in excess of potential-realizing sufficiency isn’t improving. Stable equality is improving, and brings out the best in us. Continuously rising market-led prosperity, on the other hand, encourages un-civic avidity and generates inequalities that undermine the amiable stability of egalitarian social justice.

The left-leaning 20th century literature on the distributive aspects of social justice as often as not treated wealth like manna from heaven. It’s as if the astonishing bounty of the Great Enrichment was something we’d just stumbled upon, like a cave full of naturally-occurring, neatly-stacked gold ingots in a newly-discovered cave beneath the village square. How do we divide up the gold among the villagers? Equal shares seems fair!

Or else wealth was something workers produced automatically by working only to have it stolen by the idle rich, who control the state’s goons. Or wealth was something that mechanical and social engineers could get together to produce with the right combination of workers and machines. Since it was no problem whatsoever producing more than enough for everybody (our best men are on top of it!), there was no good reason for anybody to have more than everybody else.

John Rawls’ Theory of Justice, the 20th century’s most influential text on the nature of social justice, was controversial on the left because it provided a supply-side argument against the assumption that socialist equality was the end-all-be-all of distributive justice. Rawls recognized that incentives to production have something to do with levels of consumption and argued persuasively that unequal shares are justified if they leave society’s least advantaged as well off they can be. For many socialists, admitting that justice can possibly admit of unequal shares gives away the store. Rawls sold them out.

Yet Rawls himself, like many other mid-century social democrats, had an uneasy attitude toward enrichment, and tended not to see much to admire in the human motives or legal rights that tend to produce it. Rawls was a liberal who saw society in liberal terms as a “cooperative venture for mutual advantage,” but there was in Rawls’ theory very little appreciation of the possibility that liberal rights and economic growth might need each other. Indeed, he thought that, after a certain modest level of material comfort had been achieved, a regime of fair cooperation founded on liberal rights would do better—and would still be the most desirable of all regimes—without any growth at all.

When you take a certain level of productive, surplus-generating social cooperation more or less for granted, and consider economic output to be a sort of engineering problem, the moral problems of political economy, the problems of social and distributive justice, have to do with consumption, not production. Assume a pie. Now, who should get how much of it? This consumption-side fixation led thinkers on the left to prescribe measures that would and did harm the productive institutional, cultural, and moral underpinnings of the Great Enrichment.

Now let’s flip the ideological coin. Those on the classical liberal/libertarian right, who I think more clearly grasped the causes and moral significance of the Great Enrichment—thinkers like Ludwig von Mises, Friedrich Hayek, Milton Friedman, and Ayn Rand—inclined toward indifference or outright hostility to the idea of “social justice.” They tended to see it, not entirely unreasonably, as a stalking horse for a technocratically managed economy, confiscatory levels of taxation on the wealthy, and progressive redistribution in the name of socialist material equality.

Hayek thought the liberal market order could survive only if its champions were able to articulate moral ideals as inspiring as socialism. Yet he found it inconceivable to argue for his own ideal of the liberal market order as a realization of social justice. It wasn’t that the left was wrong about what social justice requires. It was that “social justice” was pernicious gobbledygook. For Hayek and the mid-century liberal right, capitalism was a goose that lays golden eggs. “Social justice” was a euphemism for breaking its neck.

In Free-Market Fairness, John Tomasi, a political theorist at Brown, makes the case that the classical liberal and libertarian allergy to social justice, which he calls “social justicitis,” is based on a number of intellectual mistakes. I think he’s right, and will have a thing or two to say about what’s wrong and right in the attacks of Hayek and others on the very idea of social justice in a future post. In Tomasi’s forthcoming book with Matt Zwolinski, Libertarianism: A Progressive Intellectual History, they argue that 20th century libertarians became so obsessed with combating socialism that libertarianism narrowed into a sort of codified anti-socialism, fixated on defending the underpinnings of the free enterprise system against technocratic economic planning and redistributive leveling. In the process, they argue, libertarianism lost much of what had made 19th-century classical liberalism such a powerfully progressive and emancipatory force. Having hunkered down in a defensive anti-socialist posture, libertarians become unable to see, for example, that the feminist and civil rights movements were fighting for forms of freedoms earlier classical liberals had devoted their lives to. Social justictis, in my view, is a further symptom of this anti-socialist monomania. And it saddled classical liberals with a distorted and enfeebled message that forces a false choice: whatever liberty is, whatever free markets and limited government are good for, it ain’t social justice.

In McCloskey’s magisterial “bourgeois” trilogy, she shows that moral rhetoric has real, often profound political and economic consequences. I don’t think she says so, but her argument led me to suspect that it was a big intellectual and rhetorical mistake for classical liberals to concede social justice to the socialists and technocratic welfare-state liberals.

Hostility to the very idea of social and distributive justice lent weight—and continues to lend weight—to the charge that those who defend robust economic rights, regulatory restraint, and limited government are heartlessly indifferent to the welfare of the poor and working classes. Moreover, libertarian and conservative hostility to social justice creates a strong, though illogical, presumption of hostility to whatever social justice is thought to require. That’s why many advocates of economic liberty—even those who don’t believe in the absolute inviolability of property rights and the inherent injustice of redistribution—reflexively badmouth the welfare state with little regard for the possibility that the welfare state is an efficiency-enhancing institution that helps maintain popular support for relatively free markets by ensuring they more or less benefit everyone. Meanwhile, people who like social insurance, and worry about bad luck and the human costs of capitalist creative destruction—that is to say, mostpeople—turn away in contempt or bemusement from what’s advertised to them as the politics of freedom.

More importantly, and more disastrously, rejecting the very idea of social justice, letting it harden into principle, hobbled classical liberalism’s ability to make the argument it has always been making, in less attractive terms, all along: that social justice is, first and foremost, a supply-side concept; that social justice is about the moral equality, respect, and rights that call forth cooperation and foster the creativity and cultivation of potential that generates ever larger surpluses, which, once they’ve been created, we can worry about divvying up; that social justice is a cause and effect of the Great Enrichment; that increasing social justice will make us greater and more greatly enriched.

It’s a potent and beguiling argument. It is an important argument. I’m convinced that it is, in broad strokes, a sound argument. The failure of our forebears to make it shouldn’t stop us from making it now.